As part of the administration's plan to overhaul the shelter system, Mayor Bill de Blasio has pledged to close all of the city's cluster sites — which Banks said will be 70 percent completed with this purchase — while converting a portion of them to permanent housing through purchase or eminent domain. | Getty Images

City closes on deal to buy cluster apartments for $174M

The city and a consortium of nonprofit developers are set to close on the purchase of 17 buildings currently being used as cluster housing for the homeless, officials told POLITICO.

The de Blasio administration had initially halted the transaction after a federal investigation into questionable financial practices by the landlords, but officials said they have since vetted the purchase and decided to proceed.

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The Department of Homeless Services and the Department of Housing Preservation and Development are set to provide the financing for the $174 million purchase of the portfolio spread throughout the Bronx and Brooklyn. The sites, which have operated as temporary homeless housing, will ultimately be converted to affordable housing for current residents and will be owned and operated by nonprofit housing groups.

"We are able to provide permanent housing to 1,200 children and adults, while at the same time guaranteeing affordable, rent-stabilized housing for the families and the other tenants in these buildings," said Steve Banks, commissioner of the Human Resources Administration, in an interview.

The city has long had its eye on the roughly 470-unit portfolio of cluster sites, which are private apartments the city has used to temporarily shelter the homeless. Cluster units have historically been mismanaged and lacked the types of social services many need to stay on their feet and remain in housing for the long term.

As part of the administration's plan to overhaul the shelter system, Mayor Bill de Blasio has pledged to close all of the city's cluster sites — which Banks said will be 70 percent completed with this purchase — while converting a portion of them to permanent housing through purchase or eminent domain.

However, earlier this year, federal prosecutors began looking into the owners of the properties — the Podolsky family — and a series of reports began to raise questions about the deal. In response to the federal probe, de Blasio decided to temporarily halt the city's purchase of the buildings.

On Thursday, Banks said that the city's law department looked into the transaction after the allegations and found that nothing prevented the agencies from going through with the transaction. He added that the city conducted an appraisal of the properties to arrive at the ultimate price tag.

Joshua Goldfein, a tenant attorney who has represented residents of the buildings for the Legal Aid Society, said he would have rather had the city enforce violations in the first place and compelled the Podolsky family to be better landlords.

But at this point, he argued, purchasing the sites is the best option.

"[The landlords] don’t care whose money it is," Goldfein said. "They could make this deal with anybody else, and then we wouldn't have the ability to work with the tenants."